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News & Notes
SUMMER 2014

The Transfer of Excess Development Rights. Selling Air?
Real estate developers in New York City seeking to construct a brand new building or to expand on their existing building face zoning constraints on the size of the buildings that may be built on a particular piece of land. Faced with this zoning limitation, these real estate developers sometimes turn to the adjoining landowners for excess development rights to maximize what they can build on their site. Obviously in New York City, particularly in Manhattan, there is a premium placed on constructing a building as large and as tall as possible. After a mini-slump, these transfers of development rights appear to be more prevalent than ever. Read more...
 
President’s Message

Over the last 200 years, the vast land that we call the United States of America went from being a loose confederation of 13 colonies to 50 strong and unified states. Through wars, treaties, purchases and annexation, the U.S. acquired a land mass totaling 3.79 million square miles. As population soared from a few hundred to over 318 million, this land has been increasingly bought and sold. Two centuries ago, the purchase and sale of land simply involved the land’s surface and whatever -- if anything – was on it. However, as the value of land expanded beyond its surface – to the minerals, liquids and gasses below, the space above, and the water around and over it – so too did the rights and responsibilities governing those real estate transactions.

With that have come increasingly detailed laws and regulations pertaining to its ownership. Issues concerning air rights, development rights, mineral rights and beyond are evermore complex. It is further complicated by the growing demand to maximize the return on every investment. In this newsletter, we look at some of the less known physical, legal and financial elements impacting real estate today. As property owners look to increase, decrease and/or manage their real estate portfolio, it’s never been more important to identify and understand every opportunity and risk, from tax benefits and potential leasing profits to title risks and development limitations.

We hope this issue provides a hearty portion of insightful information and serves as a valuable source of trusted advisors to help you navigate the increasingly complex U.S. real estate landscape.


Joseph I. Rosenbaum
 
 
 
Time and Tide Wait for No Man Beautiful scenery. Breezy waves. The opportunity to swim, sail or fish right off your back yard. These are some of the major benefits of owning waterfront property. A house on the beach or along a river bank can make an ideal vacation home, investment or business opportunity.
However, the ownership of land affected by the flow of water, better known as riparian rights, can raise a multitude of issues regarding the rights to use land and the jurisdiction of the land upon which the water flow is situated. The transient nature of water can further cloud ownership issues. Read more...
 
 
Mineral Rights Cause and Effect In a typical real estate transaction between a buyer and a seller, when title to real property is transferred, all corresponding rights are transferred as well. In such a scenario, the property transferred is a ‘fee simple’ estate. The owner of a fee simple estate owns all corresponding rights to the land, including land, sky, water, and minerals. However, some states allow for the owner to stipulate severance of these rights, leading to a “split estate” system. The “split estate” system allows one parcel to be owned by separate and distinct entities. There is also a system called “fractional ownership” where the surface owner splits the ownership of the mineral rights with others, such as other family members, a corporation, or the government. Lastly, there is a “severed ownership” system, where the government owns all oil and gas resources below non-federally owned surface property. Read more...

 
 
Multi-family Properties Lead the Way in the
Real Estate Market Recovery
The jobs market is on the mend, housing prices are rising, factory production is increasing, and retail is on the road to recovery. The signs are visible as economic conditions in the U.S. are steadily improving. The general recovery in market fundamentals is boosting the real estate industry, with multi-family markets leading the way.
According to Ariel Property Advisors*, a NYC investment property sales firm, there were 675 multi-family transactions in NYC in 2013, with 1,230 properties totaling $8.87 billion in sales. Compared to 2012, these figures represent a 3% decline in transaction volume, but a 4% gain in dollar volume and a 19% increase in building volume, per the firm’s Multifamily Year in Review: NYC 2013 report. Read more...
 
 
Best Practices at the Intersection of
IRC §1031 and FIRPTA
When a nonresident alien sells real property in the United States, the Foreign Investment in Real Property Act (“FIRPTA”) generally requires the transferee (i.e., the buyer) or transferee’s agent to forward 10% of the sales price to the IRS as withholding against possible tax owed by the seller on the transaction (IRC Sec. 1445). If the transferee or the transferee’s agent fails to withhold and forward the tax as required, that party can be liable for the full amount of the tax plus interest and penalties. This withholding tax creates particular challenges in IRC §1031 Like-Kind Exchanges.
Read more...
 
 
Cost Segregation: Take Two In February of 2009, a cost segregation study was conducted on an apartment complex in New Jersey. The nearly $21 million property was home to 288 residential apartment units. The specialists at Madison SPECS conducted a tax and engineering analysis to identify and reclassify eligible assets for accelerated depreciation. The study resulted in 17% of the property accelerated from the standard depreciation rate of 27.5 years to the shorter rate of five years for personal property and 15 years for Land Improvements. The property owner realized a net tax benefit of over $900,000 in the first three years. Read more...
 
 
Focus On Arnon Wiener, Esq. News and Notes talks with Arnon Weiner, Esq., the new CEO of LeaseProbe and Real Diligence. Mr. Wiener takes the helm of the company after many years spent in operations. He discusses the evolution of his job description as he grows along with LeaseProbe and Real Diligence, the biggest challenges he faces going forward, and his vision for the future.
Read more...
 
 
In Brief – Case Study 1 Chicago Title Ins. Co. v. Bristol Heights Associates, LLC, 142 Conn. App. 390, 70 A.3d 74 (Conn. App. 2013), cert. den. 309 Conn. 309, 68 A.3d 662 (Conn. June 20, 2013).
Chan Yi Cheng vs. Huang, 43 Misc. 3d 1207(A), Supreme Court Kings County, March 31, 2014
Frank J. Blangiardo v. Commissioner, T.C. Memo. 2014-110; No. 11978-13 Read more...